Hedge Funds Are Buying SunOpta, Inc. (STKL)

In this article we are going to use hedge fund sentiment as a tool and determine whether SunOpta, Inc. (NASDAQ:STKL) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is SunOpta, Inc. (NASDAQ:STKL) the right pick for your portfolio? The best stock pickers were taking an optimistic view. The number of bullish hedge fund bets went up by 7 lately. SunOpta, Inc. (NASDAQ:STKL) was in 21 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 22. Our calculations also showed that STKL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to view the key hedge fund action encompassing SunOpta, Inc. (NASDAQ:STKL).

Do Hedge Funds Think STKL Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in STKL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is STKL A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Oaktree Capital Management, managed by Howard Marks, holds the biggest position in SunOpta, Inc. (NASDAQ:STKL). Oaktree Capital Management has a $305 million position in the stock, comprising 4.7% of its 13F portfolio. Coming in second is Glenn W. Welling of Engaged Capital, with a $145.2 million position; the fund has 10.5% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Philip Hempleman’s Ardsley Partners, Richard Driehaus’s Driehaus Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position Engaged Capital allocated the biggest weight to SunOpta, Inc. (NASDAQ:STKL), around 10.48% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 4.68 percent of its 13F equity portfolio to STKL.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Luminus Management, managed by Jonathan Barrett and Paul Segal, created the biggest position in SunOpta, Inc. (NASDAQ:STKL). Luminus Management had $7.4 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker’s Woodline Partners also initiated a $6.2 million position during the quarter. The following funds were also among the new STKL investors: Charles Davidson and Joseph Jacobs’s Wexford Capital, James Thomas Berylson’s Berylson Capital Partners, and Greg Eisner’s Engineers Gate Manager.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SunOpta, Inc. (NASDAQ:STKL) but similarly valued. We will take a look at AlloVir, Inc. (NASDAQ:ALVR), trivago N.V. (NASDAQ:TRVG), Weis Markets, Inc. (NYSE:WMK), Silverback Therapeutics, Inc. (NASDAQ:SBTX), Ranpak Holdings Corp (NYSE:PACK), Uniqure NV (NASDAQ:QURE), and ACM Research, Inc. (NASDAQ:ACMR). This group of stocks’ market values are similar to STKL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALVR 9 121353 1
TRVG 10 84965 2
WMK 12 47154 1
SBTX 19 707651 -5
PACK 14 651146 1
QURE 25 340984 -10
ACMR 19 213388 3
Average 15.4 309520 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $310 million. That figure was $633 million in STKL’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand AlloVir, Inc. (NASDAQ:ALVR) is the least popular one with only 9 bullish hedge fund positions. SunOpta, Inc. (NASDAQ:STKL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STKL is 76.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately STKL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on STKL were disappointed as the stock returned -25.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.